when should I close my postion?

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Hey Hal when should I close my postion?


When dealing with covered call strategies, there are a few scenarios in which you might consider closing your position:

  • Reach Target Profit: If the call option has decreased in value and you've achieved a significant portion of the maximum potential profit, you might consider buying back the call to close out the position and lock in gains.
  • Protect Stock Gains: If the underlying stock has risen significantly and is nearing the strike price of your sold call (or has exceeded it), you may wish to buy back the call to avoid having the stock called away, especially if you're bullish on the stock's further upside.
  • Rolling the Call: If you want to extend the expiration date and potentially adjust the strike price, you can "roll" your position. This involves buying back the current call option and selling another one with a later expiration or different strike price.
  • Stock Declines Significantly: If the underlying stock has declined significantly, and you believe it will continue to do so, you might decide to buy back the call for a smaller loss than initially received and sell the stock to avoid further losses. Alternatively, if you remain bullish on the stock in the long term, you can hold onto it and perhaps sell another covered call later.
  • Change in Market Outlook: If your view on the market or the specific stock changes, you might want to adjust your position to reflect that.
  • Expiry Approaching with ITM Option: If the expiration date of the option is nearing and your option is in-the-money (ITM), you may decide to buy it back to avoid having the stock called away. Alternatively, if you're okay with selling the stock at the strike price, you can let it be assigned.
  • Dividend Capture: If the underlying stock is about to pay a dividend and you want to capture it, you might consider buying back an ITM call option to ensure the shares aren't called away before the ex-dividend date.


When making these decisions, it's essential to evaluate transaction costs and potential tax implications.


If you have any specific questions about the strategy, feel free to ask in comment section below, and I'll do my best to explain further! Hals blog

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